Banks on Wednesday jostled to deposit excess cash into the liquidity management facility of the Bangko Sentral ng Pilipinas (BSP), pushing regulators to declare the scheme aimed at capping inflation was working.
In a message to reporters, BSP Governor Nestor Espenilla Jr. said the latest auction for the central bank’s term deposit facility—where banks are paid yields for depositing idle funds over the short term, thus removing them temporarily from inflationary circulation—was met with strong demand from financial institutions.
Espenilla had stressed the central bank’s recent decision to cut banks’ reserve requirements by one percentage point would not result in higher inflation because the P90 billion that the move would release would be mopped up by the increased volumes in the term deposit window.
“The auction results today confirm success and effectiveness of our operational adjustment,” Espenilla said, asserting that the reserve requirement cut was not a monetary easing move, but a structural adjustment meant to reform outdated policies in the banking sector.
BSP said banks tendered P80 billion for the P50 billion on offer for the seven-day window, with the rate averaging 3.1767 percent. This was higher than the previous week’s 3.0685 percent.
The response for the longer tenors, while still oversubscribed, was more muted.
Banks tendered P43.3 billion for the 14-day facility and P23.5 billion for the 28-day window.